US equities came into Friday looking for a second consecutive weekly gain, a fifth in six and a seventh in nine.
Unofficially, Labor Day marks the end of summer for Americans. Technically, though, September 22’s the last day of the season in the Northern Hemisphere.
So I suppose I can say the summer melt-up’s ongoing. And boy, oh boy has it been kind to stocks. Since reclaiming all-time highs in late June, the S&P’s notched 21 new records.
As the figure shows, it’s just record after record. I hope you bought the “Liberation Day” dip. It’s hard to believe now, but on April 8, we were looking at SPX <5000.
Earlier this week, in “Acrophobia,” I ran through the valuation discussion. Again. Suffice to say they’re rich. The valuations, I mean. Specifically, the S&P’s forward multiple ranks in the 96%ile on a 45-year lookback. That’s pretty daunting to put it politely.
But if it’s any consolation, that’s actually not quite as stretched as the same simple metric was at the height of the 2021 “stimmy” bonanza. The S&P also traded richer (~24.5x) during the dot-com bubble.
That said, another key bubble measure hit a record over the summer. The updated figure below shows you the value of US corporate equities expressed as a share of (or, more to the point, as a multiple of) GDP.
I refresh that chart fairly often. When I updated it on Friday morning, prompted by a similar chart in a BofA note, it ticked above the 2021 highs.
That’s a better metric for assessing stocks through a socioeconomic lens because it captures the extent to which financial assets are outstripping the real economy.
Don’t forget your Piketty: When the rate of return on capital outpaces economic growth, inequality worsens. The last thing unstable societies need is more inequality.
Risk on ! Won’t last forever.
Hell, it might. We’re kind of in a perpetual motion machine with it these days.
More fuel for the rise of populism all around the world. Note that populist leaders and parties rarely advocate budget cuts and austerity. The US is an exception when they are aimed at lazy minorities or labelled as such.
He’ll hand out money to the lower- and middle-classes if the economy takes a turn for a deep recession. And Republicans will find a way to love it.
Its what any Nobel Peace Prize nominee would do.
Budget cuts for thee and never for me seems to be one of the GOP’s many many hypocratic values.
But all of this detached equities growth, and the prospect of turning back on the money printing machine, obviously has me concerned about how high inflation will get and then the prospect of a future where the USD has no real value.
“The center does not hold” a famous poem once said, it feels like we are witnessing that come to life.
Politicians of all stripes will always and easily accept higher inflation, over time. Printing money is so easy.
Once everyone is used to 2+%, dial it up to 3+%, wait for everyone to get used to that, then dial it up to 4%. Etc.